Based on the Spring Statement of 2018, we have reason to be optimistic that the U.K. government has brought an end to the annual delivery of two major fiscal events. However, the need for consultation continues, and we can be assured that whatever our views are “on changes that the government is considering,” we have an avenue in which to express them.
Prior to the Spring Statement, the U.K. government published its Good Work: A Response to the Taylor Review of Modern Working Practices. Together with the response publication it also published four consultations that have attempted an ambitious program of work that could have a significant impact on U.K. employers.
The Taylor Review, requested by the Prime Minister, is an independent review of modern working practices by Matthew Taylor, Chief Executive of the Royal Society of Arts. The prevailing premise behind the report is stated as, “All work in the U.K. economy should be fair and decent with realistic scope for development and fulfilment.”
The consultations look at the following in an attempt to reply to or explore further a number of the Srecommendations made by Taylor (53 in total):
Employment Status Consultation
The thorny and often complex subject of employment status is at the core of both employment law and the tax system. It determines the rights that an individual receives, such as the National Minimum Wage and holiday pay and the protections they receive. Here we refer to unfair dismissal protection and the right to be paid statutory redundancy pay. Status also affects the taxes that individuals and the businesses they work for must pay.
The current framework is complex and often fails to provide clarity and certainty for individuals and businesses. This is increasingly the case for those who are working in new ways, including those working through digital platforms in the “gig economy.”
The consultation looks in detail at how the options proposed by the review would work, both in legal terms and in relation to the realities of the modern labour market. It also seeks to understand the potential impacts and implications of those proposals and to recognize the wide ranging impact any proposal could have. This includes in areas such as statutory payments and workplace pensions.
This is an area that has been reviewed before; it won’t be solved simply.
Employment status is dependent on the interpretation and application of case law against the specific facts of each case, making it difficult for some individuals to predict their status. To address this, the consultation explores the possibility of placing the employment status tests developed by the courts into primary legislation.
This consultation also considers the rules that determine who gets which rights, who is subject to the rules that currently apply to employees and/or workers, and who is subject to the (very limited) rules that currently apply to the self-employed. Also included in this consultation is the question: what constitutes working time for the purposes of the national minimum/living wage specifically for those working via an online platform?
Dependent contractor is a term recommended by Taylor’s review to describe a category of worker who is eligible for worker rights but is not an employee. Core tests—such as mutuality of obligation, personal service, and control—have been enshrined from longstanding case law. However, in developing the dependent contractor test, it has been recommended that “renewed effort to align the employment status framework and the tax status framework to ensure the differences between the two systems are reduced to an absolute minimum.” Ambitious for sure, and at the time of writing the arguments as to the supremacy of tests are raging.
A more precise employment status test is being explored and could see the introduction of a more objective criteria being used with a more precise structure.
With no fewer than 64 questions, it would be impossible to do justice to this report—but it will be interesting to see how this research develops. Full details of the Employment Status Consultation can be found at gov.uk.
Enforcing Employment Rights
Perhaps the key issue underpinning all of the recommendations from the Taylor review is that for the system to work, there not only has to be clarity, but justice. Employers that break the rules must expect there to be consequences for their actions, and individuals who feel they have been wronged should feel that the system will allow their case to be heard and that a fair decision is reached. And of course, the system must punish employers that are noncompliant so that compliant firms are not put at a competitive disadvantage.
In Enforcement of Employment Rights, the government accepts that action is needed in this area, and this consultation explores how best to ensure that the vulnerable receive the level of protection while balancing the feasibility and cost-effectiveness for the taxpayer.
Action will be taken by the U.K. government by:
- Seeking views on how to establish a naming scheme for employers that do not pay employment tribunal awards
- Increasing the aggravated breach penalty limit to at least £20,000
- Gathering information to help determine best next steps for government to take responsibility for enforcing a basic set of core rights for vulnerable workers
Measures to Increase Transparency in the U.K. Labour Market
The review highlighted a number of areas that would benefit from greater transparency around contractual arrangements and made a number of recommendations.
The government has accepted several of these recommendations in full, and the transparency consultation focuses on essential details prior to implementing them. This includes the proposal to extend the right to a written statement to workers as well as employees, and the recommendation that the government should do more to promote awareness of holiday pay entitlements and, in a move that will delight payroll departments throughout the nation, increase the holiday pay reference period from 12 to 52 weeks.
Prioritising transparency of information, this review paper also includes proposals relating to the introduction of a right for workers to request a change in contract to improve predictability.
The recruitment sector has two main types of legally defined types of service; (1) Employment agencies (which introduce people to hirers to be employed by the hirer directly); and. (2) Employment businesses (also known as temping agencies) which employ or engage people to work under the supervision of another person.
Current legislation covers principles such as restrictions on fees, ensuring that temporary workers are paid for the work they have done, recordkeeping, advertising, and ensuring that identity and suitability checks are carried out on work-seekers.
The regulations provide a framework for arrangements between agencies and employment business as well as the arrangements between hiring businesses which include contracts between work-seekers and agencies/employment businesses.
But there is increasing complexity in this area, and it can sometimes be difficult for work-seekers to understand who is ultimately responsible for paying them. The number of organisations involved in the chain can be quite lengthy, and it is not unusual for a work-seeker’s money to pass through a number of different organisations before they receive payment. This is not illegal, unless deductions are being made in breach of legislation, but it can be confusing.
In response, the government is proposing that any contract/terms of business between a work-seeker and an employment business should contain a “key facts” page that should be provided to work-seekers at the time they register with the relevant organisation. This page would be presented at the start of either registration or engagement with an employment business or any job offer conversation.
This consultation also looks at the use of umbrella companies and intermediaries. Being an employee of an umbrella company can be beneficial to a work-seeker as they can move between employment businesses and retain continuity of employment (and payment). However, this is dependent on those employment businesses using, or being willing to use, the same umbrella company to make payments to the relevant work-seekers.
The government is suggesting a change in legislation that would require umbrella companies and intermediaries to meet a set of minimum standards in line with the minimum requirements currently in place for employment businesses. This would ensure that work-seekers have sufficient information to understand who is paying them, what deductions are being made, and for what reason, allowing work-seekers to make a better-informed decision on whether to accept a contract.
Samantha Mann, MAAT, MCIPPdip, is a Senior Policy and Research Officer for the Chartered Institute of Payroll Professionals (CIPP) who has more than 30 years of experience working within payroll in the small and medium enterprise (SME) sector. Mann uses her wealth of knowledge to provide technical support to the advisory service, write technical articles, and write and deliver presentations.